Naira Pressure To Reduce As Foreign Reserve, Oil Price Improves
BEVERLY HILLS, March 13, (THEWILL) – The pressure on the naira is expected to reduce and stability maintained at the foreign exchange (FX) market this week as a result of noticeable improvement in the foreign reserve and crude oil prices, even as the Monetary Price Committee is expected to meet.
The nation's foreign reserve rose to $27.88 billion as of March 10, representing 0.33 percent compared with $27.78 billion as of February 18, according to data on the Central Bank of Nigeria (CBN) website.
Also, the price of Brent crude rose by $7.33 per barrel or 22.11 percent to $40.49 on Friday, as against $33.16 per barrel on February 17.
“This week, we anticipate stability in the FX markets on the back of recent appreciation in the price of crude oil in the international market and the consequent accretion in the country's external reserves,” an analyst at Cowry Asset Management said.
Last week, the naira/dollar exchange rate at the official segments of the market remained tightly held at N197/$ and N199.10/$, respectively.
A report by Afrinvest Securities Limited shows that FX rate in the Bureau De Change (BDC) market segment recorded a considerable amount of activity, starting last week at N330/$ on Monday. FX rate at the BDC appreciated 3.8 percent on Tuesday, settling at N318.00/US$1.00 but depreciated back toN320/$ on Wednesday and Thursday, respectively.
Ayodeji Ebo, head, investment research, Afrinvest, noted that over the weekend, the President weighed in on the controversy trailing the FX allocation for foreign studies and related demand for FX, maintaining that the country cannot afford it. This is coming after the CBN clarified its position on the matter that it has not stopped the sales of FX for students studying abroad.
Notwithstanding the above, FX rates across segments maintained relative stability W-o-W, as the local unit closed at N322/$ in the parallel market on Friday.
At the money market last Monday, the CBN auctioned Open Market Operations (OMO) worth N160 billion, which reduced liquidity from the financial system, consequently, OBB and O/N rates rose 0.8 percent from the previous trading session to close at 4.0 percent and 4.4 percent, respectively.
As with the first four trading sessions of the week, OBB and ON rates trended upwards on Friday with OBB and O/N, closing at 5.1 percent and 5.6 percent, rising 1.9 percent and 2 percent W-O-W, respectively.
Activities in the T-bills market were broadly bearish last week as liquidity level stayed at low ebb throughout the week. Sell pressure persisted on the short to medium tenors with marginal activities on the longer-term bills.
Average T-bills rates across tenors rose 0.4 percent from the previous trading session to close at 6.7 percent on Monday. Average rates across tenors settled at 6.6 percent (higher than rates on all trading days last week) by midweek as DMBs provisioned for the FX auction.
Story by David Oputah